Of China’s 15 fastest-growing export markets since 2009, 10 are in Africa

Below is an extract from a SBG Securities report.

Growth below trend in advanced economies after the 2008/9 financial crisis put great pressure on China’s export sector. In response, exporters recalibrated their geographical footprint, with emerging markets as a source of demand more important each passing year.

China’s exports to Africa have more than doubled since 2009, from US$47bn in 2009, to $106bn in 2014 (even though China’s sales have moved sideways since 2015).

Perhaps more startling is that 10 of China’s 15 fastest-growing export markets since 2009 are in Africa. These are Djibouti, Kenya, Ethiopia and Tanzania in East Africa; Senegal, Ivory Coast, Guinea, Ghana and Cameroon in West Africa; and Mozambique in Southern Africa. These now account for over one fifth of China’s total sales to Africa, from one tenth seven years ago, together consuming nearly $25bn of Chinese goods in 2017. This reinforces our view that Beijing and, more importantly, Chinese firms – both SOEs and private owned firms – are continuing their focused and nuanced approach to Africa. However, Africa needs to step up to the plate to ensure Beijing’s further commitment.

China’s exports to Africa reached $95bn for a second consecutive year in 2017. Overall, Africa has proved a resilient market for China, with exports rising by an average 14% y/y each year since 2010 – five percentage points faster than China’s sales elsewhere. Fast growth in Africa has managed to offset demand softness in Africa’s largest economies – Nigeria and South Africa – in recent years. Promisingly, there has also been an up-turn in demand in both Nigeria and South Africa, with sales to both countries increasing in 2017 for the first time since 2015, by 17% y/y and 13% y/y respectively.

Also, the recovery in commodity prices – especially metals and hydrocarbons – resulted in Chinese imports from Africa rising 32% y/y last year, to $75bn. Total China-Africa trade has now returned to growth, increasing by 11.4%, from $151bn in 2016, to $169bn in 2017 – the fastest rate since 2012. This recovery in trade growth is good news, laying a positive foundation for the sixth Forum on China and Africa Cooperation (FOCAC) which will be held in Beijing in September this year.

Nevertheless, the trade balance of most African countries has continued to deteriorate materially. Only five African countries have a trade surplus with China. Kenya – East Africa’s most developed economy – is a case in point. It imported $5bn worth of Chinese goods, including the steel and equipment used for the $4bn Chinese-built railway, but shipped only $166m of goods in return. A similar story is true for Djibouti, Ethiopia, Ghana and a number of other African countries.

This trade deficit is new, starting in 2015. African countries would hope for this to be ameliorated through partnership with China; and FOCAC has long been the primary platform to implement policies to develop Africa’s industrial base. The trade imbalance though no doubt complicates China’s geopolitical approach to Africa, undermining the emphasis on South-South co-operation and developing-world solidarity.

OBOR (“One Belt One Road”, “the Silk Road Economic Belt”) has become the pillar for the external ambitions of Xi’s administration. However, Africa still has only tangential connections to this $1tn project. The forum will either reinforce Africa’s relevance, or confirm the continent to perhaps be less central than before. Therefore, the urgent focus should be on African projects to remain relevant. Africa really should aim to emerge from FOCAC with a more concrete connection with OBOR, entrenching the diplomatic and commercial connection between China and Africa. To this end, African countries have eight months to come up with a more systematic, coordinated and industry-specific plan to remain at the center of China’s foreign policy.

Jeremy Stevens is an international economist for the Standard Bank Group, based in Beijing, China.